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LPL Moves to Boost Credit Facility to $1B, Refinance $900M Debt

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What You Need to Know

  • The aggregate amount of LPL’s outstanding debt, though, “would be substantially unchanged as a result of the transaction,” the firm said Thursday.
  • LPL Holdings anticipates the transaction will be wrapped up by mid-March.
  • The move comes three months after LPL agreed to buy Waddell & Reed’s wealth management business for $300 million.

LPL Holdings, a unit of LPL Financial, says it will expand its revolving credit facility from $750 million to $1 billion and refinance its existing $900 million senior unsecured notes due in 2025.

As part of these moves, LPL Holdings plans to offer about $900 million in senior unsecured notes with maturities dependent on market conditions.

The aggregate amount of LPL’s outstanding debt, though, “would be substantially unchanged as a result of the transaction,” the firm said Thursday. 

This is because “LPL Holdings intends to use the net proceeds from the senior notes offering, together with cash available for corporate use, to redeem its existing $900 million of senior unsecured notes due 2025 … and to pay fees and expenses related to the senior notes offering and the credit agreement amendment,” it explained.  

LPL Holdings anticipates the transaction will be wrapped up by mid-March. The parent firm works with some 17,300 independent advisors. 

LPL on Growth Tear

The move comes three months after LPL Financial agreed to buy Waddell & Reed’s wealth management business, which had 921 independent advisors and $63 billion of assets under administration in September 2020, from Macquarie Asset Management for $300 million.

As part of the deal, LPL and Macquarie plan to form a long-term arrangement, with Australia-based Macquarie becoming a key asset management partner of the independent broker-dealer.

LPL says it will complete the transaction after Macquarie Group acquires all issued and outstanding common shares of parent company Waddell & Reed Financial for $1.7 billion.

In February, LPL President and CEO Dan Arnold said that Waddell & Reed advisors who serve about 80% of that unit’s client assets have “already committed to join our platform” following the close of the deal.

The 80% retention “puts us above our 70% modeling assumption thus far in the process,” according to Matthew Audette, LPL’s chief financial officer. Waddell & Reed Wealth Management assets at the end of Q4 were $70 billion, up $7 billion from Q3, he noted.

Last month, Arnold said LPL was looking not only to increase the number of Business Solutions it offers to affiliated advisors, but also to expand these solutions to non-LPL advisors.

The firm finished the fourth quarter of 2020 with about 1,400 monthly subscriptions, more than double the level of the fourth quarter of 2019, according to the executive.

LPL remains “focused on continuing to innovate and deliver” those services to LPL advisors, so “that’s where the majority of our allocation of investment goes across this strategic play and that’s allowing us to continue to learn and innovate on our offering,” the CEO said on a call with equity analysts in early February.

However, “our hypothesis is these services could potentially be offered to all 300,000 financial advisors in the marketplace,” he said.

 

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